Thinking about what to do with First Horizon stock right now? You’re not alone. A look at the company’s recent share price movements raises eyebrows, not just for the swings but for what they might signal about value and sentiment. Over the past week, First Horizon’s stock slipped a notable 8.9%, and it’s down 10.5% in the last month. That kind of short-term decline can be unsettling if you’re watching closely, but it tells only part of the story. Zoom out, and the year-to-date return clocks in at 1.4%, while over one year the stock is up an impressive 19.7%. Looking at the past five years, First Horizon has more than doubled, showing a 119.0% return despite some bumps in the road, including a 6.1% dip over the last three years.

What’s driving these dynamics? Industry watchers point to evolving market expectations and shifts in risk appetite driven by larger financial sector developments. While some periods have seen temporary pullbacks, long-term investors have benefited from the company’s resilience and ability to adapt. For those wondering if the recent discount offers a real opportunity, here’s an interesting stat: First Horizon earns a value score of 4, based on six valuation checks. In other words, analysts see the stock as undervalued across four out of six key measures.

This sets the stage for a closer look at exactly how First Horizon measures up across different valuation methods, and, later in the article, a deeper dive into the best ways to truly assess a stock’s worth in today’s market.

First Horizon delivered 19.7% returns over the last year. See how this stacks up to the rest of the Banks industry.

The Excess Returns model is a straightforward method that evaluates how efficiently a company generates profits over and above its cost of equity. It measures whether First Horizon is adding real value for shareholders by looking at the company's return on invested capital versus what it costs to raise that capital.

For First Horizon, the core figures tell a compelling story. The company has a Book Value of $17.20 per share and a Stable Earnings Per Share (EPS) of $2.04, based on weighted future Return on Equity estimates from 11 analysts. With a Cost of Equity calculated at $1.32 per share, First Horizon is generating an Excess Return of $0.73 per share. The average Return on Equity stands at 10.87%. The Stable Book Value going forward is projected at $18.77 per share, reflecting solid growth according to estimates from 12 analysts.

This model’s methodology highlights that First Horizon is expected to keep generating returns above its cost of capital. Based on these projections, the estimated intrinsic value per share comes out at $37.23, while the current stock price is significantly lower. The implied discount is 45.5%, suggesting that First Horizon stock is undervalued by a wide margin.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for First Horizon.

Our Excess Returns analysis suggests First Horizon is undervalued by 45.5%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

For profitable companies like First Horizon, the Price-to-Earnings (PE) ratio is a widely used and suitable valuation tool because it shows how much investors are willing to pay per dollar of earnings. The PE ratio helps investors understand whether a stock is cheap or expensive relative to its actual profit generation, making it especially useful when the business has steady earnings.

In general, higher growth expectations and lower perceived risk justify a higher “normal” or fair PE ratio. Companies with stable earnings, healthy profit margins, and strong future prospects can reasonably command a higher multiple, while those with risks or smaller growth potential usually trade at a discount.

First Horizon currently trades at a PE of 11.8x. This sits slightly above the industry average of 11.2x for banks and just below its peer group average of 12.2x. However, looking beyond simple benchmarks, Simply Wall St’s proprietary Fair Ratio, which incorporates First Horizon’s earnings growth, margin profile, industry context, and risks, comes to 13.1x. This approach offers deeper context, as it goes beyond basic comparisons and adjusts for factors that really affect a stock’s fair value. As a result, it provides a more tailored and insightful reference point for investors.

Comparing First Horizon’s actual PE of 11.8x with its Fair Ratio of 13.1x, the shares are currently trading at a noticeable discount to their fair value based on these underlying fundamentals.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Earlier we mentioned there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is your story about a company, where you bring together your assumptions about future revenue, profit margins, and fair value to create a full picture. Narratives are not just numbers but also include the reasons and context behind them. They make valuation approachable by connecting the company’s business outlook to a financial forecast and then to a fair value, helping you decide exactly when to buy or sell as the gap between your calculated fair value and today’s price appears. Available on Simply Wall St’s Community page, Narratives are easy to use and dynamically update with every new earnings result or major news release, making them powerful for both new and experienced investors. For example, on First Horizon, some investors create a bullish Narrative based on robust cost discipline and rising profitability, pointing to a fair value up at $27.00, while more cautious users, concerned by economic risks, set their Narrative at $22.00. You can quickly see how differing stories lead to different targets and how your view stacks up in real time.

Do you think there's more to the story for First Horizon? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include FHN.

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